Regulator: No Blue Skies, Yet

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ANAHEIM, Calif.-Don't look for a sustainable recovery just yet, according to one regulator.

William Haraf, commissioner of the California Department of Financial Institutions, predicted charge-off rates at credit unions and banks will continue at an elevated rate through 2013 or even 2014. "When I'm looking for key drivers of a sustainable recovery...right now they are hard to find," he said.

Noting the miserable savings rate in the U.S., Haraf observed that many households entered the recession with a lot of debt. Moreover, he expects the problems in residential real estate to peak before those in commercial real estate.

Asked if the lessons learned from this recession were the same as those from the Great Depression, Haraf gave a qualified yes, noting that the level of hardships in the 1930s were not repeated, as unemployment was not as high and many safety nets are in place. "From the financial shock they received, our grandparents learned the importance of saving and not getting overextended. Some of that had eroded, which led in part to the problems we have had."

When the DFI works with NCUA to resolve a troubled credit union, Haraf said the goal is to find a CU from the same state to merge it into, but the challenge is finding a CU capable of absorbing another troubled one.

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